American Well Corporation (Amwell) — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Amwell provides enterprise software and services for virtual care, including platform subscriptions, clinical visits, and related services. Figures below are in U.S. dollars; financial statement amounts are generally in millions unless stated otherwise.
Financial performance and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $69.2 | $62.2 | $198.0 | $180.0 |
| Operating loss | $(71.1) | $(55.5) | $(211.0) | $(131.7) |
| Net loss | $(70.6) | $(50.9) | $(210.5) | $(128.9) |
| Net loss attributable to Amwell | $(70.1) | $(51.5) | $(209.3) | $(128.5) |
| Adjusted EBITDA (non-GAAP) | $(41.9) | $(31.5) | $(131.8) | $(81.6) |
| Operating cash flow | Not separately provided | Not separately provided | $(156.4) | $(96.6) |
Q3 basic and diluted loss per share was $0.25, versus $0.20 a year earlier; the nine-month loss per share was $0.77 versus $0.51. Gross margin, calculated as revenue less cost of revenue excluding depreciation and amortization, was approximately 40.0% in Q3 2022 versus 43.5% in Q3 2021, and 42.0% for the first nine months versus 41.8%.
At September 30, 2022, cash and cash equivalents were $332.6 million and investments were $249.0 million, for combined cash and investments of $581.6 million. The company reported no debt. Current assets were $657.2 million and current liabilities $105.1 million. Management said available cash, cash equivalents and investments were expected to fund operating expenses and capital expenditures for at least 12 months.
Changes versus comparable periods
- Revenue increased 11% year over year in Q3 and 10% for the nine-month period. Platform subscription revenue rose to $31.9 million in Q3 from $26.7 million and to $90.2 million for nine months from $78.1 million.
- Q3 visit revenue decreased to $28.8 million from $30.0 million, while nine-month visit revenue increased to $89.3 million from $85.4 million. Other revenue rose to $8.5 million from $5.4 million in Q3.
- Operating expenses grew faster than revenue: total costs and operating expenses rose 19% in Q3 and 31% for nine months. Nine-month R&D increased 52%, including higher Converge consulting and personnel costs; depreciation and amortization increased 111%, principally due to acquired intangible assets.
- Net loss attributable to Amwell widened 36% in Q3 and 63% for nine months. Adjusted EBITDA loss also widened. The prior-year periods included acquisition-related expense and an income tax benefit associated with the 2021 acquisitions; 2022 reported modest income tax expense.
- Operating cash use increased to $156.4 million from $96.6 million for nine months. The $413.8 million decline in cash, cash equivalents and restricted cash also reflected investment purchases, net of sales and maturities; investments were $249.0 million at quarter-end.
Management commentary, outlook and risks
- Management attributed subscription growth to new customers and expansion among existing customers. It said the Q3 visit-revenue decline reflected a shift toward lower-priced urgent-care visits and away from behavioral services, which it associated with seasonal viruses and Omicron variants.
- Clients completed 4.7 million platform visits in the first nine months of 2022, compared with 4.3 million a year earlier; scheduled visits increased to 3.5 million from 3.1 million. Active Providers were reported at 98,500 at September 30, including 95,000 customer providers and 3,500 AMG providers. Amwell changed its active-provider calculation methodology during Q3 and cautioned that historical metrics may be adjusted.
- Management described increased technology and product investment, particularly in the Converge platform, and expected R&D spending to decline gradually during 2023. The filing provides no formal revenue or earnings guidance and says operating losses are expected in future years.
- Remaining performance obligations were $171.8 million at September 30, down from $219.9 million at December 31, 2021; the company expected to recognize 44% of the September balance in the following 12 months.
- Important risks include continued losses and uncertain telehealth-market growth, customer concentration, competition, Converge adoption and development costs, healthcare regulation and reimbursement changes, privacy and cybersecurity exposure, and acquisition integration. One customer represented 22% of Q3 revenue and 21% of accounts receivable at quarter-end.
Contingencies and unusual items
- The Teladoc patent-infringement claim was dismissed on June 30, 2022, following a confidential settlement. The filing does not disclose settlement terms; management reported no pending legal matters expected to have a material adverse financial effect.
- Conversа and SilverCloud earn-outs were resolved early through amendments and settled in 2022 with approximately 6.0 million Class A shares in total. The contingent-consideration liability was zero at September 30.
- Nine-month stock-based compensation expense was $48.3 million, compared with $31.8 million a year earlier. The filing also reported substantial noncash stock compensation and foreign-currency translation losses.
Investor verification points
- Verify the sustainability and composition of revenue growth, particularly subscription expansion versus visit and services revenue, and the duration of the visit-mix shift.
- Track operating cash use, cash and investment balances, and progress toward management’s stated 12-month liquidity horizon.
- Assess whether Converge investment and higher operating expenses translate into improved margins and reduced adjusted EBITDA losses; reconcile non-GAAP measures to GAAP results.
- Review customer concentration, renewal and expansion trends, and the reliability of active-provider and visit metrics given the methodology change.
- Confirm the effects of acquisition integration, earn-out share issuance, stock-based compensation, and applicable telehealth reimbursement and regulatory changes.